Despite the underperformance of fixed income we discuss in this Spotlight guide why the value proposition of the asset class hasn't gone away. In particular we review how the RLAM management team use existing, proven funds to actively manage consistent monthly income streams and adapt the portfolio to changing interest rate and credit market factors.

Within this guide, you will find some surprising survey results from FE, a selection of adviser opinions and some Architas views too. We hope this guide will provide you with some food for thought on this burning issue.

Europe still needs TLC

Recent German unemployment numbers indicate improvements to Europe's largest economy, but continued ...

Recent German unemployment numbers indicate improvements to Europe's largest economy, but continued improving corporate newsflow will be the key to any sustainable recovery, according to JPMorgan Fleming's Stephen Macklow-Smith.

The manager of the Fleming Continental European investment trust says that two of three indicators he uses - valuation and liquidity - are "flashing green" at present.

However, newsflow is "amber", meaning that investors in Europe are not quite out of the woods yet.

"The market is cheap on a historical basis," Macklow-Smith says.

"And for the first time in years, central banks are really pumping money into economies on both sides of the Atlantic. As far as newsflow goes, it is at least not deteriorating any longer."

"The question is is the market recovery sustainable? The answer seems to be 'yes', over the balance of the year, and further improvements may be possible. But next year? That depends on newsflow and whether the increased liquidity can push demand up."

Macklow-Smith says he does not take a view on specific European economies or sectors when picking stocks.

That said, because of current valuations and liquidity, he expects cyclical and global banking stocks to rise with the European recovery.

Defensives are not the way to play the second half of this year, he adds.

Additionally, he argues the case for investment trusts being a better vehicle to take advantage of European recovery.

"Investment trusts have two things going for them: they can gear to play the recovery more aggressively, and investors can take advantage of discounts to buy assets at below value.

"Discounts are pretty wide at the moment, helped by technical issues, such as futures sold by insurance companies last year, which may have increased the supply of shares in the market."